Last week we talked about the robustness of the US propane market and the China PDH headline is another example of offshore propane demand that we believe will keep US propane prices high, and probably high relative to ethane. This will mean that ethane stays favored as an ethylene feedstock but it will keep US PDH costs higher than they have been over the last 5 years. With propane and naphtha staying out of US ethylene plants we are seeing strength in butadiene, as domestic demand picks up and production remains constrained. Butadiene could see price support for some time as the ethylene economics are unlikely to change, especially if we see more Permian output in 2Q and into 2H 2021 as this will keep ethane supplies high.
Source: Bloomberg, C-MACC, April 2021
It is April, and we are still getting restart stories after the February freeze, which helps explain why the upward pricing pressure remains on so many US chemicals. Note the march ethylene contract headline. The freeze-related outages will now run into the seasonal regular maintenance season and this will likely keep markets tight.
